“Low interest rates and abundant liquidity globally has led to significant demand pressures on housing markets around the world. Economies have tackled growing imbalances with the continued tightening of prudential-based tools and, in some cases, targeted tax measures. While the outcomes of these policies are not straightforward to assess, and up-to-date empirical evidence is not readily available for the individual economy cases, the measures likely have slowed down increases in house prices and household indebtedness, and improved the resilience of the financial sector to housing market related shocks. The trend towards coordinating prudential measures with tax-based measures is likely to improve the overall effectiveness of macroprudential policy in cases when speculative and investment demand play a major role.”

“The aim of this paper is to assess which macroprudential policy measures have been effective in containing house price and mortgage credit growth in Canada and other economies. Our analysis indicates that macroprudential policy measures have had a moderating effect on house prices and mortgage credit in Canada since 2010. International experience suggests that lower caps on debt-service-to-income (DSTI) ratios and loan-to-value ratios could be effective in containing both mortgage credit and house price growth.”